The Greater Johannesburg Transitional Metropolitan Council v Eskom

Eskom was assessed to pay regional establishment levies by the Greater Johannesburg Transitional Metropolitan Council (the appellant) for the period 1 August 1987 to 30 November 1995 under section 12(1)(a)(ii) of the Regional Services Councils Act, 109 of 1985. Eskom objected, claiming exemption under section 24 of the Eskom Act, 40 of 1987, which exempted Eskom from paying levies or fees to "the State". The appellant succeeded to the rights of the Central Witwatersrand Regional Services Council (CWRSC) on 3 December 1994 pursuant to Proclamation 24 of 1994. Eskom appealed to the Income Tax Special Court, which found in its favour (Southwood J). The Special Court held that the regional services council was a manifestation of "the State" due to ministerial control over levy calculations. The appellant appealed to the Supreme Court of Appeal with leave of the Judge a quo.

• Whether the expression 'the State' in section 24 of the Eskom Act, 40 of 1987 includes regional services councils and transitional metropolitan councils
• Whether the test of ministerial control is the appropriate test to determine if a body forms part of 'the State'
• Whether Eskom was exempted from paying regional establishment levies to regional services councils and transitional metropolitan councils

The appeal was dismissed with costs, including costs of two counsel. Eskom's exemption from paying regional establishment levies to the CWRSC and the appellant was confirmed.

The binding legal principle is that the expression "the State" in section 24 of the Eskom Act, 40 of 1987 is not limited to central and provincial government but includes the State in all its manifestations, including regional services councils and transitional metropolitan councils. These bodies are organs of government because they exercise governmental functions at regional and local levels. The test for determining whether a body forms part of "the State" for statutory interpretation purposes is primarily functional - what matters is whether the body carries out functions of government - rather than the degree of ministerial control exercised over it. The control test is appropriate for determining whether a public corporation is a government instrumentality, but not for bodies that are established as part of the governmental structure to exercise governmental powers. In the context of section 24, there is no compelling reason to limit exemptions to central government only, particularly given Eskom's important national functions.

The Court made several non-binding observations: (1) Regional services councils, while subject to more ministerial direction than municipalities, operate as a form of local government at regional level and are not public corporations in the traditional sense. (2) The Court was not satisfied that the degree of ministerial control over regional councils was so significant as to make them mere pawns of the Minister. (3) The Court noted it could resolve the matter without reference to the Interim Constitution, despite both counsel referring to various constitutional provisions. (4) The Court observed that "the State" is used extensively in legislation but not with consistency, and its precise meaning depends on context. (5) Transitional metropolitan councils are clearly local authorities established to exercise governmental functions at a local level. (6) The modern trend is to recognize that municipal government, though local, is a phase of government (citing Rex v Bethlehem Municipality and Hleka v Johannesburg City Council).

This case establishes an important principle regarding the interpretation of "the State" in South African law. It clarifies that for domestic law purposes, "the State" is not limited to central government but encompasses all tiers and manifestations of government including local and regional authorities that exercise governmental functions. The case is significant for statutory interpretation, particularly regarding tax exemptions and the relationship between different levels of government. It emphasizes functional analysis over formalistic tests of control when determining whether a body is part of "the State". The judgment also provides important commentary on the nature and status of regional services councils and transitional metropolitan councils in the South African governmental structure during the transition period. The case demonstrates the courts' approach to interpreting exemption provisions in the context of public entities performing functions in the national interest.